A Realtor’s Revolt

Geoff Dembicki reports for The Tyee. His work also appears in Vice, Foreign Policy and the New York Times, and his book, Are We Screwed? How a New Generation is Fighting to Survive Climate Change, will be published internationally by Bloomsbury US later this year.

Steve Saretsky began his career as a realtor in Vancouver just as home prices climbed to crazy highs. He realized most of the things the public hears about the market are either false or over-simplified. So he decided to expose the truth.

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Here, in a nutshell, is what Saretsky has learned. The reason most Vancouverites can’t afford a home is because of three related trends. The first thing you need to know is that low interest rates make it easier than ever to borrow money and invest in real estate. The second is that buyers from China and elsewhere are investing in the market at record levels. The third is that as real estate prices across the city skyrocket, a surge of domestic speculators — including first-time buyers worried they’ll miss their chance to buy a home — is causing prices to go even higher.

Or in Saretsky’s words: “I would boil it down to low interest rates creating an easy credit environment, slash foreign capital coming in and distorting the market, and ultimately, as prices went up, it fuelled a fear-of-missing-out speculation.”

That’s the sort of statement you don’t often hear from local real estate industry leaders — or their political allies in the BC Liberal Party. Industry groups like the Urban Development Institute rarely mention interest rates, foreign buyers or domestic speculators. Instead, such groups tend to blame people fighting new condo towers. “The resistance to building new homes is overwhelming, yet the criticism of house prices is overwhelming. You can’t have it both ways,” UDI’s Anne McMullin has argued.

Saretsky believes we can. Simply flooding the market with luxury condos that are snapped up by foreign buyers and domestic speculators isn’t solving affordability, he argues; it’s making the housing crisis worse.

And unless we change course, the industry is in for “a rude awakening,” Saretsky predicted. “People genuinely have the mentality where prices will never come down. But if you go and study history there’s not one housing market that hasn’t gone through a substantial correction.”

Saretsky was born and raised in Richmond. He only began working as a realtor a little over three years ago. Yet in his short career he’s witnessed dramatic changes to Vancouver’s housing market. Home prices have always been high here (the average detached home was worth $1 million in 2010). But in 2015 prices got indisputably insane. Average detached home prices grew $420,000 in five months.

Saretsky could sense something weird was happening. But he was still new to real estate. Industry leaders argued that lack of housing supply was the issue. And so Saretsky began to argue the same. “You sort of take on the mentality of every other realtor,” he explained. In late 2015, as the average price of a detached home in the city reached $1.7 million, Saretsky wrote on his blog that “Ultimately Vancouver prices will always remain high. It is a highly sought after city that has a tremendous amount of appeal to people all over the world. The limited supply of land in Vancouver due to the ocean and the mountains also plays a key role in prices.”

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But Saretsky couldn’t stop doubts from creeping in. He saw unbuilt condo towers being marketed overseas. Realtors promising clients that an $800,000 home would quickly be worth $1 million. Young millennial couples desperately bidding for new homes way off in the suburbs. People taking on risky levels of debt. “Like, buying second and third condos and they’re making $80,000 a year,” Saretsky observed.

In his spare time Saretsky read everything he could about real estate. He studied markets in other cities. He found smart financial people on Twitter.

“You start to go down that rabbit hole,” he said. In early 2016, he began to adopt a more critical view of his industry.

“Being a realtor here in Vancouver, of course I don’t want to see a housing collapse. However, I think it’s negligent to say everything is fine,” he wrote on his blog. “Nobody can truly predict the future of the market. Ultimately people taking on massive debts to get into the housing market is a scary thing. What happens if the Canadian economy collapses or interest rates rise?”

As the year went on, Saretsky’s views became more outspoken. In October, he referred to Vancouver’s housing market as a case study in “irrational exuberance.” Speaking of the rapid price increases over the past few years, Saretsky wrote on his blog that “we have just witnessed one of the most impressive housing bubbles in history. Perhaps this bubble doesn’t pop, maybe it just deflates.” And a month later he was warning his readers about Canada’s “unhealthy addiction to real estate.”

Saretsky was doing interviews for outlets like CBC and Global. His blog’s readership was growing. But exposure opened him up to criticism. Some people in the industry weren’t thrilled about his views. “Very respectfully, were you practicing real estate in 2008? I was. If we threw up the panic button like MANY industries did, we might have experienced mayhem,” wrote a commenter on Saretsky’s blog.

“Nope, was not practicing real estate in 2008,” Saretsky responded. “I have been cautioned by many realtors and people in the industry that I could be the one to cause panic and crash the market.... The numbers are the numbers, I think the public deserves the truth.”

Yet Saretsky is also sympathetic to the bind many developers find themselves in. Land in Vancouver is so expensive right now that building affordable housing isn’t economically feasible. In order to make a profit, he explained, developers “have to build a bunch of luxury units.” Which is why Saretsky doesn’t believe we can rely on the market alone to solve Vancouver’s housing crisis. Governments need to play a bigger role — not just in building more supply, but in regulating how it gets sold.

The NDP-Green government in Victoria now has the opportunity to do that. Both parties’ housing platforms include measures to boost the number of affordable units on the market while clamping down on speculation. The NDP has promised, among other policies, a two per cent “absentee speculator’s tax” on homes that are bought as investments but sit empty, while the Greens have proposed to double the foreign buyer’s tax and close several domestic tax loopholes. “I definitely think it will have an impact,” he said. “It remains to be seen if they go ahead and implement them.”

In the meantime, developers are adamant that our housing crisis could be solved simply by building more condos. “In the City of Vancouver there are zero ready-built, ready-to-move-in townhomes available for sale, everything else has been sold,” the UDI’s McMullin recently argued.

Saretsky knows he isn’t the only person in real estate who desires serious change. Some industry people worry about the type of city their children will grow up in. Or the economic fallout from a housing crash.

“A lot of realtors I’ve spoken with want some sanity to the market,” Saretsky explained. “They know it isn’t sustainable.”

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